MasterCard (NYSE:MA) launched a new rewards program, targeting mobile payments, in collaboration with the popular mobile application provider, shopkick.  Customers will be able to link their cards to shopkick’s Buy & Collect program and will be eligible to earn the company’s proprietary reward currency, kicks, when they make transactions through their mobile phones. The initiative will give a boost to MasterCard’s PayPass wallet services, which allows users to make cashless transactions through their mobile phones. (See Wallet Services Provide A Glimpse Into MasterCard’s Future)
Mobile Payments Kick In
The duo will offer incentives such as “spend $40 and receive 250 kicks”, and the 250 bonus kicks will also be awarded to each MasterCard card that is linked to the Buy & Collect program. Kicks earned can be redeemed for goods such as music downloads and movie tickets through supported retailers such as American Eagle Outfitters, Toys ‘R’ Us and Wet Seal. This offering will help MasterCard capitalize on the growing popularity of smartphones such as Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android-based phones.
Mobile commerce is set to grow, with the sales through mobile phones expected to surpass $30 billion by 2016, according to a recent study by Deloitte.  While mobile phones currently account for 5% annual retail stores sales in the U.S., the convenience and portability afforded by mobile phone payments is expected to see the number grow to as high as 19%, by 2016, with over $600 billion in projected sales volumes. Mobile phones also have an increased influence in decision-making during shopping, as a recent study by Deloitte revealed that mobile shoppers are 14% more likely to convert and make a transaction in the store than the non-mobile using customers.
We expect MasterCard’s Gross Dollar Volume (GDV) or the dollar value of the transactions processed by the company to increase through the Trefis forecast period, fueled by a surge in mobile payments.
Security appears to be the main concern while shopping through mobile phones. A hearing held by House Subcommittee on Financial Institutions and Consumer Credit has stated that current laws covering credit and debit cards such as the Electronic Funds Transfer Act and Truth In Lending Act are insufficient while covering mobile transactions.  The small screen used in mobile phones make it difficult for customers to understand the fine details of the transaction that they are about to undertake, leaving them vulnerable to fraud. The regulators also said that the presence of non-banking companies during a transaction poses questions over liability in case of a loss. We will keep a close eye on the developments in this exciting field in the near future.
Our price estimate for MasterCard is $465, which is in-line with the market price. You can gauge the effect of a change in the forecast on our price estimate by modifying the chart above.Notes:
- MasterCard strengthens mcommerce presence with mobile rewards push, Mobile Commerce Daily, June 29th, 2012 [↩]
- Smartphones will influence 19pc of retailers’ sales by 2016: study, Mobile Commerce Daily, June 28th, 2012 [↩]
- Regulators Say New Rules May be Necessary for Mobile Payments, Nasdaq, June 29th, 2012 [↩]